Why do Brad Pitt, Cher, Hugh Jackman and Alex Trebek share a Delaware address?

Why do Brad Pitt, Cher, Hugh Jackman and Alex Trebek share a
Delaware address?
Written by Mike Chalmers The News Journal
March 10, 2013                                                                            delawareonline.com

                                                        Why do Brad Pitt, Cher, Hugh Jackman and Alex Trebek
                                                        share a Delaware address?

                                                        Because the state makes it easy and cheap to set up their
                                                        charitable foundations with little oversight.

                                                        It‟s hard to imagine Brad Pitt and Angelina Jolie spending
                                                        much time at their office on Silverside Road in Brandywine
                                                        Hundred.

                                                        The low, brown-brick building is a far cry from the
                                                        mansions and spotlights of Hollywood. Anyone –adoring
 Suite 123 in this building at 501 Silverside Road in   fans, stalkers, the paparazzi –can just walk through its glass
 Brandywine Hundred is the place many celebrities
 consider their legal address for their charitable
                                                        front door, down the hall, up the stairs and around the
 foundations. / ROBERT CRAIG/THE NEWS JOURNAL           corner to reach their office, Suite 123. The carpet is beige,
                                                        not red.

The 501 Silverside Road address is the place the movie superstars and global philanthropists consider their
legal address as co-presidents of the nonprofit Jolie-Pitt Foundation. It‟s incorporated here but gives all its
money –$21.5 million since 2006 –to charities in Cambodia, Namibia, Pakistan and destitute communities in
the United States, according to financial statements through 2011.

The Jolie-Pitt charity is one of more than 1,200 foundations incorporated in Delaware, nearly all of which
focus their philanthropy elsewhere. The number has tripled since 2000. Only Rhode Island has more
foundations per capita, but Delaware specializes in so-called “foreign” foundations that have no significant
connection to the state.

Nearly 800 of those foundations –established by wealthy donors to give money to favorite causes –legally
reside with Pitt and Jolie behind the oak door of Suite 123 on Silverside Road. The office is home to
foundations created by actor Hugh Jackman, entertainer Cher, NFL quarterbacks Matt Hasselbeck and Philip
Rivers, “Jeopardy!” host Alex Trebek, “Melrose Place” creator Darren Star and actress Yeardley Smith,
better known as the voice of Lisa on “The Simpsons.”

They give to their alma maters and their churches, to charities for sick children and endangered animals, to
nonprofits advocating abortion rights and others fighting to end abortion.

They‟re all drawn by Delaware‟s well-earned reputation as a place to set up shop quickly, cheaply and with
few questions –many of the same reasons that nearly 1 million for-profit corporations are here.

“It‟s the company state, and it‟s well known that way,” said
 What is a foundation?
                                                  David Wickert, executive director of Chapel &York, a
                                                  British company that serves another 100 Delaware-
 Tax-exempt organizations –those with
                                                  incorporated foundations with an overseas focus. “Isn‟t that
 501(c)3 status from the IRS –generally fall
                                                  on your license plates?”
 into two broad categories: public charities
 and private foundations. Public charities
                                                  Chapel &York‟s virtual office in downtown Wilmington is
 get at least one-third of their income from
                                                  home to foundations like Save the Rhino International,
 public donations, while private
                                                  Friends of the American School of Warsaw and Historic
 foundations get all or almost all of their
                                                  Royal Palaces, which supports several popular British
 income from one person or family or from
                                                  tourist sites.
 investments. A foundation is required to
 spend at least 5 percent of its assets
                                                  Dozens more foundations, including one created by fashion
 annually for charitable purposes.
                                                  designer Isaac Mizrahi, live at other offices in the city.

Delaware appeals to wealthy people who want to give away their money without a lot of administrative
overhead, said Jeffery Haskell, chief legal officer for Foundation Source, the Connecticut company that
administers the Silverside Road foundations.

“Delaware is really rather special,” he said. “They really know how to attract for-profit businesses and
nonprofits, too.”

The impressive growth in foundations comes with little oversight over the nonprofits‟ activities. Like most
states and the federal government, Delaware‟s oversight of the growing number of private foundations and
public charities is “woefully inadequate,” said Aaron Dorfman, executive director of the National
Committee for Responsive Philanthropy, a nonprofit advocacy group.

The Internal Revenue Service audits only a small portion of the 1.1 million financial statements filed by
nonprofits annually, most of which are a year or two out of date anyway, Dorfman said.

States like Delaware don‟t do much better.

“Most state attorneys general have just one person overseeing the entire charity sector,” Dorfman said.
“Without staff at the state level to investigate, most abuse goes undetected. It‟s not rampant, but it is
significant.”

In Delaware, foundation oversight falls to the seven lawyers in the Attorney General‟s consumer protection
unit, the same lawyers who also must cover 3,200 other charities and all kinds of disputes between
consumers and businesses. Their work is entirely driven by complaints, said director Gregory Strong.

“Someone would have to call us and say, „I gave money to this organization and I don‟t think it was used for
charitable purposes,‟” he said.

The Attorney General‟s Office collects the Form 990 financial statements that Delaware nonprofits submit
annually to the IRS, Strong said. But no one reviews those statements, and the state does not make them
public.

Strong said 39 other states require nonprofits to register and submit financial information annually so
regulators and the public know who is operating in their states.

Delaware legislators considered a similar system in 2009. But the bill, which would have imposed an annual
fee of up to $450 and financial audits for large nonprofits, failed to get much traction and died. The
proposed annual fee on a sliding scale for 1,200 foundations could have generated as much as $190,000 for

the state, plus $183,000 from other charities.

“We have an interest in making sure that people who are donating to charity can be sure it‟s a legitimate
charity,” Strong said. “If they‟re not registered as a charity, who knows where the money is going?”

Easy draw

Dorfman and other experts say Delaware‟s easy incorporation process is the primary draw for nonprofit
foundations.

Foundations in Delaware pay just $25 a year in franchise tax, don‟t need CPA-certified audits and don‟t pay
state tax on unrelated-business income, as they would in some other states, Haskell said. Delaware law
allows foundations to have just one director, instead of three, and the state makes it easy for companies that
manage their paperwork to file annually. Foundation Source, for example, pays the franchise tax and files
papers for all of its 800 nonprofits at once, instead of separately, Haskell said.

“They do things in a friendly, efficient, convenient way,” Haskell said. “It‟s just such a clear choice to go
with Delaware.”Delaware also has 200 years of settled case law that can apply to virtually any situation, said
Mike Cooney, an attorney with Nixon Peabody in Boston who specializes in nonprofit law. He has
incorporated hundreds of nonprofits in Delaware, he said.

“Delaware is a great state to incorporate in because it‟s a straightforward process and there aren‟t a lot of
„historical barnacles‟ that attach themselves to the entity,” Cooney said.

The IRS requires all tax-exempt organizations to be incorporated somewhere, so Delaware appeals to
philanthropists who don‟t care where their legal home is, Wickert said. That‟s especially useful for
organizations with a global focus, including those that Wickert‟s Chapel &York serve out of the downtown
Wilmington office.

“More and more Americans want to support organizations outside the United States, and the only way to do
that is to make a donation to a group registered in the United States,” said Wickert, a former Episcopal priest
who lives in Sussex, England.

Foundation Source, by far the largest manager of Delaware foundations, handles a client‟s paperwork and
monitors whether the group pays out at least 5 percent of its assets for charitable purposes each year, as
required by the IRS. The company also keeps a list of tax-exempt organizations that are eligible to receive
the foundations‟ money.

“We tell our clients, „We worry so you don‟t have to, so you can focus on what matters to you, your
philanthropy,‟” Haskell said.

The companies providing the administrative service sell philanthropists on the idea that they can run their
foundations conveniently out of a Delaware address and for less money than they would pay for a dedicated
staff. And that makes foundations more appealing to the moderately wealthy, not just the super wealthy.

“More and more attorneys are suggesting to their clients that with as little as $500,000 it might make sense
to have a foundation,” Haskell said.

Of course, the super wealthy have their Delaware-incorporated foundations, too.

J.P. Morgan CEO Jamie Dimon –one of the nation‟s highest paid bank executives –lives in the New York
City area, but his foundation based in Delaware reported $10.7 million in assets at the end of 2011. Dimon‟s
foundation is among about 80 administered by his bank and all are incorporated in Delaware, including the

Estee Lauder Fund, of cosmetics fame, and the Hugh J. Grant Foundation, a former New York City mayor,
not the actor.

Not in Delaware

The News Journal tried to encourage several celebrity philanthropists to talk about their foundations in
Delaware. Some declined –through their publicists –while others did not return phone calls. But they‟ve
talked elsewhere about their charitable causes.

Jackman, for example, spoke on Katie Couric‟s ABC show in December about how he and his wife,
Deborra-Lee Furness, experienced miscarriages during their struggle to conceive children. They adopted two
children, so their foundation gives some of its money to the Worldwide Orphans Foundation. Furness is
director of the group‟s Australian branch.

The Yeardley Smith Foundation gave $900,000 to the Grameen Foundation, a nonprofit microfinance lender
that works in poor countries, after the actress traveled to Haiti to see its work in 2009.

“I‟m greatly inspired by people who demonstrate initiative and perseverance,” Smith said in a press release
at the time about her donation. “I saw with my own eyes how eager these women are to be self-sustaining
and that the smallest bit of success can rebuild a person from the inside out.”

The charity created by Jolie and Pitt has a website for the Maddox Jolie-Pitt Foundation, describing
programs in Cambodia that offer education, health care, environmental preservation, and economic
development services. Their foundation also gives money to more projects in Africa, Central America and
other countries in Asia.

Their foundation and the roughly 1,200 others in Delaware report about $7 billion in total assets, IRS
records show.

So who are all those foundations giving to? Not Delaware‟s needy.

Only about two dozen –or 2 percent –gave substantial grants to charities here, said Mary Kress Littlepage, a
Florida consultant who has studied the state‟s philanthropic sector. The other 98 percent spread their money
across the globe.

“They‟re essentially post-office-box foundations,” she said.

The foundations should direct some of their millions to address local needs, said Christopher Grundner,
president of the Delaware Alliance for Nonprofit Advancement.

“They‟re receiving a benefit from being here, and they should want to give back something,” he said.

That would be difficult to monitor and enforce, Grundner said. And it could lead to legal disputes, such as
the one unfolding now between the Delaware Attorney General‟s Office and the Nemours Foundation. In
that case, the state claims Nemours is short-changing Delaware by focusing more of its philanthropy on
Florida in violation of the intent of foundation-creator Alfred I. du Pont.

Other states have become embroiled in similar disputes, without much success, said Leslie Lenkowsky, a
professor in the School on Philanthropy at Indiana University. “Virtually everyone has abandoned that rule,”
he said.

Lenkowsky said wealthy philanthropists, especially younger ones, often form foundations precisely because
they want control over how their money is used and want to be involved in giving it away.

Shunning spotlight

Haskell said many of Foundation Source‟s clients –A-list celebrities aside –don‟t seek publicity for their
philanthropy.

“Some of our clients are everyday people, some are very wealthy and highly prize their privacy,” Haskell
said.

Translation: Don‟t ask Foundation Source to talk about them.

In three phone interviews, company spokesman Rich Polt stressed that Foundation Source would not discuss
its specific clients or even confirm that someone is a client, despite those connections being clearly spelled
out on public IRS financial forms.

“Foundation Source does not, by policy, give out the names of its clients. We never have,” Polt said.

Polt asked for, but did not receive, a list of foundations to be mentioned in this story so Foundation Source
could alert those clients to the publicity.

Aaron Sosnick, a manager at the huge New York-based hedge fund Caxton Associates, is one of the
Foundation Source‟s wealthy clients, and one of its biggest. But Sosnick stays out of the spotlight, with only
a few brief mentions of him in the news over the past five years.

Sosnick is the sole trustee and sole contributor to La Vida Feliz Foundation, Spanish for “the happy life.”
Between 2007 and 2011, he poured $370 million into his foundation and gave away about $32.3 million to a
variety of causes, mostly in New York and California.

Haskell said Foundation Source‟s service agreement includes a confidentiality clause, promising the
company won‟t talk about its clients without their permission.

“We never, ever try to drum up business for ourselves by saying we have this client or that client,” he said.

It‟s a business model that has worked well for the company. Haskell said he doesn‟t see the business of
foundations slowing anytime soon. Indeed, Foundation Source already has created 60 more Delaware
nonprofit corporations with generic names, anticipating they‟ll become foundations as wealthy
philanthropists come along.

And when they do, they‟ll all share office space with Jolie, Pitt, Jackman and the many others at 501
Silverside Road in Suite 123.

Contact Mike Chalmers at 324-2790 or mchalmers@delawareonline.com. Subscribe at
facebook.com/MTChalmers or follow on Twitter at @MTChalmers.